Thursday, December 26, 2013

Friday Watch

Evening Headlines 
  • Fastest Japan Inflation Since ’08 Stokes Wage Pressure: Economy. Japan’s inflation accelerated to the fastest pace since 2008 last month, bringing the rate closer to policy makers’ target while threatening to erode household spending power unless employers boost wages. Prices excluding fresh food rose 1.2 percent from a year earlier, the statistics bureau said today in Tokyo, more than a median forecast of 1.1 percent in a Bloomberg News survey of economists. A separate report showed industrial output rose 0.1 percent from October, less than forecast, in a risk for projections of an acceleration in economic growth this quarter.
  • Abe Shrine Visit Risks Upending Japan’s China Export Gains. Hurdles for Japan’s economy next year may increase after Prime Minister Shinzo Abe’s visit to a shrine honoring war criminals and others risked deepening tensions with his nation’s largest trading partner. The economy, already facing the first bump in the sales tax in 17 years and contending with an erosion in household purchasing power as consumer prices rise, now confronts the potential for damage to exports.
  • Asian Stocks Climb With Metals as Yen Drops to 2008 Low. Asian stocks climbed with metals, while the yen weakened to a five-year low, on speculation the Bank of Japan will sustain monetary easing, while an improving U.S. jobs market allows the Federal Reserve to taper stimulus. China’s money market rates fell for a fourth day. The MSCI Asia Pacific Index was up 0.2 percent at 11:36 a.m. in Tokyo, set for a 1 percent weekly gain
  • Rebar Climbs in Shanghai as Tangshang City Vows to Curb Output. Steel reinforcement-bar futures rose in China, trimming a third weekly loss, after a report that Tangshang city vowed to boost measures to curb output and reduce emissions. Rebar for May delivery on the Shanghai Futures Exchange rose as much as 0.4 percent to 3,619 yuan ($596) a metric ton, and traded at 3,611 yuan at 10:28 a.m. local time. Futures are set to drop 0.4 percent this week.
  • Turkey Prosecutor Says Probe Block Threaten Rule of Law. Turkey’s legal morass thickened after a prosecutor said Prime Minister Recep Tayyip Erdogan’s government is obstructing a graft probe by preventing detentions, disobeying court orders and allowing suspects to flee. The lira extended losses after his comments.
  • Latin America’s Rout Seen Extending Into Next Year: Currencies. Foreign investors are betting the worst rout in Latin American currencies since 2008 will extend into next year as commodity export prices slump and rising U.S. bond yields lure money out of the region. The Bloomberg JPMorgan Latin America Currency Index of the region’s six most-traded currencies fell 9.5 percent this year and touched 94.65 on Dec. 24, within 1 percent of a four-year low. International investors boosted wagers to a record $21.5 billion this week that Brazil’s real will keep falling, data compiled by BM&FBovespa SA show.
Wall Street Journal: 
  • Government Pulls in Reins On Disability Judges. The Social Security Administration, smarting from recent scandals, this weekend is set to tighten its grip on 1,500 administrative law judges to ensure that disability benefits are awarded consistently and to rein in fraud in the program. The agency is rewriting the job descriptions of its judicial corps, allowing officials more latitude to crack down on judges who are awarding disability benefits outside the norm
  • Millions of Tons of Metals Stashed in Shadow Warehouses. The world's metal is slipping into the shadows. Banks, hedge funds, commodity merchants and others are stashing tens of millions of tons of aluminum, copper, nickel and zinc in a hidden system of warehouses that span the globe. These facilities are known to some in the industry as "shadow warehouses" because they are unregulated and don't disclose their holdings. They operate outside the London Metal Exchange system of warehouses, the traditional home for these metals. As of October, a record seven million to 10 million tons of aluminum were being housed in these facilities, in countries as far apart as Malaysia and the Netherlands, according to estimates from several analysts. The amount dwarfs the 5.5 million tons of aluminum in the LME-licensed warehouses, based on LME figures as of Tuesday. Just 12 months ago, the figures were about equal. A similar shift is taking place with other industrial metals, analysts say. As a result, producers and consumers are bracing for potentially wild swings in metals prices as market participants have difficulty accurately gauging supplies of these metals. With no clear insight into how much metal is in the shadow system, setting prices will become increasingly difficult, they say.
  • Bomb Near Cairo Bus Raises Fear of Growing Militancy. Deepening Political Polarization and Crackdown on Muslim Brotherhood Could Push Egyptians Toward Violent Groups. A small bomb exploded near a municipal bus here on Thursday, raising fears that deepening political polarization of the country is fueling a violent insurgency. The bombing, which injured five passengers, came two days after an apparent suicide car bombing killed 16 people at a police headquarters in the Nile Delta city of Mansoura.
  • Recession Frays Ties at Spain's Co-ops. Home Appliance Maker Fagor Shuts Factories After Failing to Get Lifeline. For decades, the giant network of industrial and retail cooperatives born in this small town was held up as an international model. Whenever one co-op got into trouble, the rest of the Mondrag√≥n Corporation would rescue it with cash or take on workers at risk of losing their jobs. Then the unthinkable happened.'
  • Marc Siegel: The Death of the Bedside Manner. ObamaCare is speeding the decline in the quality of medical practice. 'It is as painful perhaps to be awakened from a vision as to be born," James Joyce wrote famously in his masterpiece "Ulysses." I recently had such an experience when my office manager—who protects me from the daily insurance grind of referrals and approvals and pre-certifications and blood drawing—was out sick. Thus the veil was lifted from my eyes, and I awoke to the harsh realities of our medical future.
Fox News:
  • Even in Hawaii, Obama can't escape troubled state health insurance exchanges. The president may be vacationing in a tropical paradise, but there's no escaping the buffeting winds of troubled state health insurance exchanges, even in Hawaii. For openers, the botched roll out of the state exchange in Hawaii has hurt Democratic Gov. Neil Abercrombie's approval ratings: 51% of likely Democratic primary voters say they don't like the way he's doing his job.
  • Market is ignoring the bubble in housing: Pro. (video) While the data supporting the case for a housing bubble are out there, few people are actually paying attention, real estate advisor Mark Hanson said Thursday on CNBC. "According to our research, house prices on a monthly payment basis today, with rates at 4¾ percent, are more expensive than they were in 2006 at the height of the bubble. And that's because from 2003 to 2006, people used other than 30-year fixed-rate loans," he said.
  • Energy deal tightens Russia ties to Assad. An energy deal between Moscow and Damascus could influence strategic calculations for both the civil war in Syria and the drive by regional powers to exploit offshore oil and gas deposits off the east Mediterranean coast
Zero Hedge: 
  • 100 Years Of Success? - Fed 'Inflation' Style. Inflation slowly eats away at your purchasing power yet having access to debt has given the middle class the false impression that they are still protected from the unraveling impacts of inflation. They are not...
Business Insider:
  • Obama Job Approval Falls Below 40, Worse Than Bush At Same Point in Presidency. Fewer than 40 percent of the American people now approve of the job President Obama is doing as president, according to the latest Gallup daily tracking poll. Meanwhile, the percentage of American's who disapprove of Obama's job as president has risen to 54 percent. Obama's new 39 percent approval rating may be the lowest of his second-term, but it is not the lowest of his presidency.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are unch. to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 125.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 102.75 -.25 basis point. 
  • FTSE-100 futures +.56%.
  • S&P 500 futures -.07%.
  • NASDAQ 100 futures unch.
Morning Preview Links

Earnings of Note

  • None of note
Economic Releases
 11:00 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,920,000 barrels versus a -2,941,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +950,000 barrels versus a +1,337,000 barrel gain the prior week. Distillate inventories are estimated to fall by -670,000 barrels versus a -2,110,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.13% versus a -1.1% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly EIA natural gas inventory report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

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